The myth of energy independence

Story highlights

Michael Levi wrote "The Power Surge: Energy, Opportunity and the Battle for America's Future"

The idea of energy independence is "rarely more than a slogan," Levi says

Levi: "Local environmental desires" run up against what benefits the whole country

Michael Levi is my favorite energy wonk -- and not just because we both had to endure waiting for hours in the cold outside the 2009 United Nations climate-change conference in Copenhagen. (Though he got in first.)

Levi, the senior fellow for energy and the environment at the Council on Foreign Relations, is a smart, pragmatic observer of the energy wars -- and he's an excellent blogger. He knows how to cut through specious arguments on both sides of the energy-and-climate debate while keeping in target the bigger challenges facing the United States and the world.

I had a chance to talk with him about Canadian oil sands, the myth of energy independence and why we need a negotiated peace settlement to end the energy wars.

We've seen other energy revolutions go through a boom and bust cycle. What makes this moment different?

Two things make this moment special. The first is the diversity of changes that are happening. This isn't just one isolated area. Today you've got booming production of oil, natural gas. You have oil consumption, rapidly falling, rising renewable energy. It's not just one boom, it's several at the same time.

The other thing is that there are multiple forces driving the change. In oil it's not just fracking, it's expanded offshore drilling. In renewables, it's not just one technology. It's wind, it's solar, both centralized and distributed. On the car front, it is everything from better traditional engines to electric vehicles and natural gas for long-distance trucking. So when you have multiple trends and drivers, the transformation is more robust.

Your point is that the best future for America is to capitalize all the options: renewable, oil and gas, efficiency, reduced consumption. How can those things coexist?

Take expanded oil production and reduced oil consumption. To tackle climate and oil, what we really need to do is reduce oil consumption. That's where vulnerability stems from. You can reduce consumption and increase production the same time. You balance with lower imports. When someone says expanded U.S. production will lead to greatly increased global consumption and cause intolerable climate change, you have to ask what kind of increased global consumption do you need so that damage to the climate occurs.

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To get people to use more oil, the oil has to be cheaper. If we don't believe that increasing U.S. oil production will do much to decrease oil prices, and I think that's still the consensus, we can't simultaneously believe it is disastrous for the climate.

We can also talk about the electricity world. Abundant natural gas makes the economics of renewables a bit more challenging. But fundamentally, that's not the big barrier to renewable-energy growth. It is still cost and the question of government policy. But there are ways for renewable energy and natural gas to work together. Renewable energy is delivered inconsistently, while natural gas can be turned on and off rapidly to fill in those gaps.

I don't want to suggest that you can have absolutely everything. There are conflicts. But we are better off when we focus on the real tensions between different sources instead of imagined tensions. There are enough real decisions we need to make that we don't need to spend our time focused on imagined ones.

What are the real tensions?

The first big place is on local environmental concerns and squaring them with national goals. Whether it is hydraulic fracturing (fracking) for natural gas or large solar arrays in the desert where people want to protect land, our local environmental desires run up against the developments that can benefit us nationally. We need an intelligent informed conversation about that.

On oil production and consumption, in the near term reducing U.S. oil demand doesn't have a big impact on prices. You can square increased production with lower consumption. In the long run, if you want to tackle climate change, you will need lower oil consumption, and that will affect U.S. oil production. But that's a longer-term issue.

On the renewable-energy front, natural gas is displacing coal rather than renewable power. It cuts emissions but does pose a risk to renewable-energy growth and the development of that technology. If we don't guard against that, we could find ourselves in 10 to 15 years regretting we didn't develop renewables earlier.

We talk about energy independence, but you make the case that oil is sold on a global market. Is energy independence anything more than just a slogan?

It is rarely more than a slogan. People use the phrase energy independence as shorthand for producing as much oil as you consume. That's reasonable, but you need to be careful not to read into that something much bigger, that we will actually be independent of events overseas.

I have found it extraordinary to see analyst after analyst start taking about energy independence as if it's a real thing that insulates us from foreign events. That's not true. If in 1973 we could have produced as much oil as we consumed, the impact would have been enormous. We didn't have a free-flowing market for oil, or a petroleum reserve as we do now. But the world is different now, and what happens today is important and valuable but doesn't solve the problem that existed then.

Does that go for those in the renewable-energy community who make the same claim that we need to become energy independent?

If you don't use oil, you are considerably more energy independent than if you do. Oil prices can go up, and if you don't use oil, it doesn't hurt you directly.

Those who say we can become more energy secure by reducing demand for oil have a stronger platform. But it takes a long time to reduce demand. You can increase oil production faster than you can cut oil use in cars and trucks because the typical car stays on the road for 15 years or longer. It takes a long time to turn the fleet over.

Where people are stuck in the 1970s is the idea that wind or solar can get us off foreign oil. In the 1970s we used a lot of oil in power plants. But today we don't, and renewable power does not get us off oil.

We often here about the national-security benefits of Canadian oil sands. Are those claims accurate?

The security benefits of more Canadian oil production have been greatly overblown. They are not zero. In a military crisis it would be better to have more oil close to home, but I don't think we'll get into that kind of extended crisis. But when it comes to volatile global prices of oil, Canadian oil doesn't give us a special benefit. When Libya went haywire two years ago, Canadian oil went up more than Mideast oil did. But expanded Canadian production does help keep the price of oil down a little bit, and that helps the economy.

There are real climate damages from Canadian oil, but the climate damage and the economic and security benefits are small. It's trite to say this is more a symbolic debate than a meaningful one, but it is. The real impacts are local, where the oil is produced in Alberta, and those are issues that Canadians struggle with all the time. The U.S. has plenty of environmental challenges of its own without getting wrapped around Alberta's environmental issues.

So how do we get these two sides of the energy debate working together?

We're not going to have a world where the Sierra Club and Exxon sing "Kumbaya" together. But ultimately both sides can get more from an approach that capitalizes on developments across the board than in just trying to beat the other side down. That doesn't mean a grand national-energy plan. It means starting with small but real deals that allow the two sides to work together, as we did in [the energy legislation of] 2005 and 2007.

I'm drawn to things like reforming the way we do environmental permitting for energy development, whether it's oil and gas or renewables. People who want to transform the energy system should be able to do it. I like the president's Energy Security Trust, where you use some oil-and-gas revenues to fund renewable-energy research and development.

But it's frustrating because people who for decades talk of oil production being transformational now say, if you spend a couple hundred million a year of the revenues from that, it's not worth drilling. If oil production is as transformational as they claim, it should be worth it even if you just took that money and burnt it. And on the flip side, those who talk about the importance of innovation say the deal is not worth it because we can't take any more oil and gas development. People should focus on what they can gain rather than fixating on what they lose.

On the environmental side of things, there's a desire for elemental change in energy that stems from serious fear of climate change. How scared are you?

Before I started spending my time on energy and climate, I spent most of it working on national security issues. I wrote a book on nuclear terrorism. In that world you think about risks. When people give me the median projections of what will happen on climate change, some of them scare me, and some wouldn't push me to put climate change on top of the list.

What really worries me are the lower probability but higher-consequence outcomes. There are some people who say we can't focus on those events, but to me, that is the job of government. It is not to optimize society. It is to protect people against big risks that they can't handle themselves. And climate change is one of those big risks.

I'm not in the camp that if you don't follow my plan, we'll all die, but I do believe this is a top-tier issue. And not because of the certainties but because of the risks.

What are energy policies that to you seem effective and politically doable?

I try to stay away from specific policies. Too often we jump right to policies and fight over the details without stepping back and asking about what kind of future we want. The Keystone debate is an example -- we have all these fights over the details, but the question is really, 'Do we want more oil or less?'

But in the near term, I'd like to see money taken from oil and gas and put into clean energy. I'd like to see a better way to do permitting, including for new pipelines and power lines. And given the roadblocks in Congress on pricing of carbon, I'd like to see an effort to use the Clean Air Act to reduce emissions in the power sector.

But as we go further out, the big pieces that we need are to make people pay a penalty if they pollute, so the market can drive us toward lower emissions. We need to clamp down on excessive oil consumption, because we still use too much. And we should take steps to expand access but also improve regulations so we can sustainably grow oil-and-gas production without endangering people or creating a backlash.

Is cap and trade still an option for you? We've seen a lot of problems with the Emissions Trading Scheme in the European Union.

I think people have misread what happened in Europe. People don't want stricter standards for greenhouse gas emissions. Because of that, carbon prices are low. Too many observers have said this is because cap and trade is flawed. The problem isn't the machine, the problem is the political willingness to take action.

People focus on the policy machinery and not on whether people actually want to do things. Transparent and flexible policies are essential to making big cuts in emissions. You are talking about big economic transitions when you get serious about climate change, and we aren't smart enough to know how that should proceed. That means you do need to eventually use tools that allow the market to do a lot of it, and whether that is cap and trade or a carbon tax or something else is secondary, as long as you have something flexible.

Each side in energy debate seems to be able to stop each other more than they can promote their own agenda. Will that ever change?

Hope springs eternal. But what scares me is that this isn't just a pattern from the last few years, but from the last 40 years. In the 1980s, opponents of drilling were very good at getting offshore drilling constrained, and opponents of clean energy were good at shutting down programs for renewable power.

But that didn't do great things for us as a country. If we get back to a point in American politics where people are willing to agree on things, I hope people who care about energy and climate have answers for them that they can embrace. If you don't have a good idea about what you actually want to ask for on energy, you can have all the bipartisan enthusiasm you can get, but you won't make real progress.